Data

Date:: 29-05-2023
Country:: Chile
Number:: 3568-18
Court:: Arbitration and Mediation Centre of the Santiago Chamber of Commerce
Parties:: Inter Rao UES and others v. CELEC EP

Keywords

IMPLIED EXCLUSION OF THE CONVENTION (ART. 6) - PARTIES' REFERENCE TO SPECIFIC LEGISLATION AND THE CIVIL CODE OF A CONTRACTING STATE

SUPPLY OF LABOR OR OTHER SERVICES AS PREPONDERANT PART OF SUPPLIER'S OBLIGATIONS - CONTRACT NOT GOVERNED BY CISG (ART. 3(2) CISG)

Abstract

[CLOUT CASE no. 2226. Abstract prepared by Juan Manuel Ramírez Cirera]

The case concerned a contractual dispute between a Russian State-owned enterprise and its Ecuadorian subsidiary (hereinafter “the sellers”) and an Ecuadorian State-
owned enterprise (“the buyer”). The dispute arose in connection with a project involving the construction of a hydroelectric power plant at the intersection of the
Ecuadorian provinces of Pichincha, Santo Domingo de los Tsáchilas and Cotopaxi. InOctober 2010, the parties had signed a contract according to which the sellers
undertook to supply, install and commission the turbogenerator units and other electromechanical and hydromechanical equipment related to the project. The dispute
arose in March 2017, when the buyer issued an administrative decision through which it declared the contract avoided, alleging that the sellers had committed several
breaches of contract. The sellers initiated arbitral proceedings against the buyer, claiming that the breaches of contract on which the buyer had based avoidance of the
contract, including delays, were in fact attributable to the buyer itself. During the proceedings, the tribunal determined the contract to be a “semi-turnkey” contract,
insofar as the overall coordination of the project, the necessary construction works and the design work had been awarded to three other entities.

With regard to the application of the United Nations Convention on Contracts for the International Sale of Goods (CISG), the parties had expressly agreed that the law of
the Republic of Ecuador would apply to the contract. In that regard, the sellers argued in the arbitral proceedings that the Convention applied given that, in their view, under
the provisions of Ecuadorian law governing public contracts entered into with foreignpublic enterprises, the relevant international treaties – in this case, the Convention –
would take precedence over domestic public procurement rules. They also argued that those provisions, when considered in the light of articles 1(1)(a) and 3(1) of CISG,
would determine that the Convention governed the contract, since the sellers regarded the contract as a mixed sales and services contract covered by the Convention, thus avoiding the exclusion set out in article 3(2). The buyer, however, argued that the legislation of the Republic of Ecuador on public procurement1 and, supplementarily,
the Civil Code of Ecuador applied to the contract on the basis of the relevant legal provisions governing public procurement, the will of the parties (art. 6 CISG) and the
material scope of the Convention (art. 3(2) CISG).

After analysing the opinions of the parties’ legal experts and existing legal doctrine, the arbitral tribunal reached the conclusion that the law applicable to the contract
should be that proposed by the buyer, given the relevant provisions of Ecuadorian legislation on public procurement. The tribunal also argued that, in any case, the
contract would be excluded from the scope of the Convention pursuant to article 3(2) thereof. In addition, the tribunal noted that the parties had excluded the application of
the Convention (article 6 CISG) by specifying, in an addendum to the contract, that “Ecuadorian legislation” should be understood as referring to public procurement
legislation2 and the Civil Code.

With respect to the various breaches of contract on which the buyer had based avoidance of the contract, the arbitral tribunal held that the sellers had not committed
any fundamental breach that would entitle the buyer to avoid the contract. The tribunal further held that the delays in delivery were attributable to the buyer. Accordingly, the
arbitral tribunal ordered the buyer to pay most of the sum claimed by the sellers, excluding a specific part of that claim.

Fulltext

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Source

CASE LAW ON UNCITRAL TEXTS (CLOUT) (http://www.uncitral.org/uncitral/en/case_law.html), A/CN.9/SER.C/ABSTRACTS/CISG/2226}}